The purpose of a Form 1098 is to report mortgage interest paid by a taxpayer during the course of the tax year, explains Investopedia. There are other variations of Form 1098 to report interest paid on student loans, as well as reporting information regarding the donation of vehicles and boats.Continue Reading
The most common Form 1098 reports mortgage interest and points paid, explains TurboTax. The company that services a taxpayer's mortgage provides the 1098 so taxpayers who itemize their deductions know how much interest they paid on their mortgage. The form also outlines how much a taxpayer paid in prepaid points, as well as how much was paid in mortgage insurance and property taxes by the mortgage loan company, which may also be deductible. If a taxpayer paid at least $600 in interest during the tax year, the mortgage company is required to send a Form 1098. Most mortgage companies send a 1098 even if the interest paid was less than $600, states TurboTax.
Form 1098-C provides information regarding the donation of vehicles, boats and airplanes made by the taxpayer during the reporting tax year. Form 1098-E outlines the interest paid on qualifying student loans throughout the tax year, and the 1098-T provides information on qualifying education tuition paid in the reporting year. These forms are all filed with the IRS, and the amounts reported may be deducted to reduce the taxpayer's taxable income, explains TurboTax.Learn more about Taxes